NU Online News Service, Mar. 7, 6:22 p.m. – Speeding up the life insurance underwriting process at a typical insurer could cut costs and increase sales enough to compensate for a 4% increase in mortality costs, according to an underwriting process expert.
Maria Thomson, a Brimfield, Mass., actuary and underwriting consultant, says current methods are so expensive, take so long and scare off so many qualified applicants that they keep insurers from reaching middle-income customers.
“This is a major industry survival issue,” Thomson says.
She worries about survey data from LOMA, Atlanta, revealing that insurers lose about 20% of the applicants who go through a full underwriting process, which takes an average of about six weeks.
Insurers lose 5% for miscellaneous reasons, 5% because applicants are withdrawn, and 5% because applicants are rejected
Insurers lose another 5% to cold feet.
About a dozen companies that are developing or already selling systems for improving the underwriting process.
Guaranteed Quotes, Edmond, Okla., is a brokerage that is trying to help by “pre-underwriting” applicants, then asking life insurers to bid on the fully underwritten applications.
Inviva Inc., New York, asks some medical questions on its Web sales site, then issues three months of “instant term coverage,” to give applicants immediate protection while it completes a full underwriting review.
But Thomson is most excited about a new generation of wireless “point of sale” underwriting systems that will link agents’ laptop computers directly to the credit history, motor vehicle records and prescription reimbursement databases at MIB Inc., Westwood, Mass.
Agents who carry the wireless systems could give applicants price fully underwritten quotes while visiting them at home, Thomson says.
Some insurers wonder about the privacy implications of using prescription records in the underwriting process, but Thomson notes that they already ask for patient medical records.
“Really, nothing is more personal than actual medical records,” Thomson says. “We’ve already been doing the most extreme thing.”
Although Thomson supports speeding up underwriting, she warns against changing the process without thinking about the possible effects on claims.
In many cases, companies that have tried to use simplified issue programs have ended up with disappointing claims rates, Thomson says.